PTT expects Chinese demand to help profits

Energy giant earmarks $2bn for investments

PTT Plc, the national energy conglomerate, expects a net profit next year on a par with this year, even though this year it will have realised oil inventory.

The company, which intends to revise its five-year investment plan, said demand for petrochemicals in China will be a major positive factor next year.

Surong Bulakul, the chief financial officer, said under the plan the company has earmarked US$2 billion to $2.5 billion per year for investments excluding mergers and acquisitions.

In its final investment this year, PTT will spend $600 million to $700 million to acquire Sakari coal mine in Indonesia, though the deal will not be completed until next year.

PTT reported a reviewed third-quarter net profit of 36.05 billion baht, up 67.92% year-on-year.

From January to September this year, the reviewed net profit totalled 81.95 billion baht, down 7.57% year-on-year, the company said in a statement to the SET on Wednesday.

Mr Surong said the huge investment in its explorer arm, PTT Exploration and Production (PTTEP), will be completed by next month.

PTT will invest as much as 66 billion baht to maintain its ownership but has declined to disclose its source of funds.

He said book building to price PTTEP's public offering is scheduled by the end of next month.

But he declined to comment on the share dilution of minor PTTEP shareholders whose combined stake is about 20%.

"The capital increase in PTTEP has been supported by major shareholders at a meeting. The final price will have to wait until the end of November. If it is close to the market price, some investors will give up their IPO rights," Mr Surong said.

He expects average crude prices next year to remain close to this year's levels.

After $105-110 a barrel this year, he estimates it will move to the $105-115 range.

The steady oil price has been assumed on the expectation that tension between the US and Iran will lessen while the US pays more attention to Asean, especially Myanmar.

Mr Surong said PTT's revenue and net profit will depend on several factors.

The major one is the oil price, as its movement could affect revenue by $1 billion each year.

Another factor concerns the cycles of its core businesses such as chemicals and refining.

The government's subsidies on the retail prices of natural gas for vehicles and liquefied petroleum gas (LPG) have caused PTT a burden of 10 billion baht per year or more than 10% of net profit.

Mr Surong said PTT will continue to ask the government to support only needy energy users, as some sectors such as LPG for motorists should have realised their own costs from consumption.

"PTT's growth is similar to Thailand's gross domestic product," he said.

Changes to PTT's investment plan have not been disclosed.

Shares of PTT closed yesterday on the Stock Exchange of Thailand at 314 baht, down two baht, in trade worth 850 million baht.

About the author

Writer: Nuntawun Polkuamdee
Position: Business Reporter